Amazon Pays Less Tax In UK While Profits Rise

10 Aug

The latest figures show that even though Amazon’s profits trebled last year, their UK tax bill has significantly reduced.

How Much?

Amazon’s reported pre-tax profits have jumped from £24.3m to £72.3m with the company making £1.98bn in sales revenue. Where their tax bill and contributions are concerned however, the bill is down from £7.4m a year ago to just £4.6m, and their warehouse “fulfilment centres” division (Amazon UK Services) has been able to defer £2.9m, meaning that £1.7m in tax is the contribution being paid for now.

Also, Amazon Web Services UK has paid £155,000, down from £404,000 last year, even though profits there have nearly doubled from £2.7m to £5m.

Why?

Share-based payments for staff is the main reason offered by Amazon for its low tax bill during a profits boom. For example, Amazon employs more than two-thirds of its 27,000-strong UK workforce, and it has been reported that full-time warehouse staff have, on average, received shares worth more than £1,000 a year. AWS is reported to have given its staff share awards worth £11.8m (compared to shares worth £5.8m two years ago).

A rising Amazon share price has resulted in the selling of many of these shares on the open stock market. Since the tax bill is based on the sale price for company and individual, this has contributed to a lower tax bill.

Some commentators have also pointed out that Amazon basing its European operations in Luxembourg has also offered some significant tax-haven opportunities.

Based On Profits Not Revenues

Despite some anger in the UK over what looks like a relatively small tax liability for a company that appears to be doing so well here, Amazon has reportedly defended itself by saying that tax is based on profits, not revenues, and profits have remained low due to a competitive retail market, Amazon’s low-margin business, and its continued heavy investment.

Reform Calls – Public Contracts

Some commentators have also been critical and called for reform over Amazon’s payments for public contracts. For example, it has been reported that Amazon was paid more for online storage services by the Government over the first 3 months of this year than its biggest UK arm was taxed last year, despite Amazon not being made to reveal the details of their tax arrangements.

What Does This Mean For Your Business?

It is a source of great annoyance to many UK businesses that receive and pay significant tax bills, that an overseas tech giant company can appear to make big profits in the UK and yet only be required to pay what appears to be a relatively small amount of tax. It has echoes of Facebook’s UK operations last year paying only £5.1m in corporation tax, despite a profits jump and a quadrupling of revenue, thanks to advertising sales.

Whilst some are calling for reform, and some anger has been publicly expressed, some commentators have pointed to a fear of losing big companies this close to Brexit as a reason why we may not expect HM government to come down too hard on Amazon and other tech giants for the time being.